After over ten years of gains, global silver production is expected to drop this year, as new supply from projects won’t be sufficient to replace production losses from aging operations, a study released Wednesday shows.
According to the World Silver Survey 2015, published by The Silver Institute and Thomson Reuters GFMS, global silver output went up by 5% in 2014 to reach 877.5 million ounces, the 12th successive gain and a new record. This year, however mine supply is set to decrease.
“We’re just not seeing the investment in new mine capacity that would be needed to sustain continued record peak production,” Andrew Leyland, an analyst with GFMS who worked on the report, told The Street.
Weak silver prices are to blame, the report says. The precious metal lost 20% of its value last year, closing at $15.70, and dropped 36% in 2013, exceeding the losses in gold and other precious metals. In the year through Tuesday silver prices have recovered by 6.2%, but they are still close to the five-year low of $15.365 an ounce set in March.
About 70% of the global silver supply is produced while mining other metals, especially gold, copper, lead and zinc. Weak prices for these commodities are also likely to weigh on silver supply going forward, the report adds.
India to take the lead
India’s demand for jewellery surged by 47% to 62.2 million ounces, and it is set to outrank China as the world’s largest consumer, where jewellery fabrication dropped 26% to 46.7 million ounces.
“Despite the Chinese economy growing at a reported 7.4% in 2014, the true impact on the ground failed to reflect this robust performance,” the report says.
“Consumers were less inclined to spend as a result, with gold, silver, and platinum jewellery all recording annual declines as sentiment became cautious,” it adds.
The outlook for the year is rather lukewarm. The report concludes that while silver prices will see some short-term weakness, they are likely to end 2015 at more than $17 an ounce, with a couple of years of modest price increases to follow.